McCain Throws Down the VAT Gauntlet

The capstone of President Obama’s the “Glut the Beast” strategy is to maneuver the country into accepting a massive new Value-Added Tax (VAT). This as yet unannounced policy has been lurking in dark policy corners for months, with no word from the President. Senator John McCain (R-AZ) has decided not to wait on Obama’s pleasure, and so has offered an amendment in the form of a Sense of the Senate Resolution to the bill pending on the floor of the Senate to extend Unemployment Insurance benefits. The McCain resolution reads simply:

It is the sense of the Senate that the Value Added Tax increase will cripple families on fixed income and only further push back America’s economic recovery.

When they called the roll on the McCain amendment, 84 Senators stood with America’s families and Senator McCain against the VAT, while 13 made clear their intentions to soak the American taxpayer with a devastating new tax. This vote was strikingly reminiscent of the 1995 Senate vote that sent the Kyoto Protocol on global warming to its well-deserved grave.

The “Glut the Beast” strategy is beguilingly simple. It starts with hiking federal spending as fast as possible. On this, Obama and his allies have been notably successful.

This federal spending surge has turned the unsustainable long-term fiscal picture about which so many have warned into a short-term fiscal disaster to which the President can speak gravely as though his policies were not the major cause. In the face of this fiscal disaster he can even create a Debt Commission to buy time until he is ready to make his move.

The next step is critical. The President and his many allies must establish the spending is nothing new really, that it is inevitable, vital, an Act of God, anything but the consequence of their policies and strategy. They thereby hope to create the belief that reversing the spending surge is impractical substantively and politically. As Obama’s huge deficits must be tamed, and if spending cannot be cut as he implies, then taxes must increase. And there comes the VAT to save the day.

Enacting a VAT would be the crowning achievement as Obama and his congressional allies seek to recast the nation into a full state of dependency on Washington. Nothing less is at stake. If Americans have other ideas for the country’s future, then they need to challenge anyone running for office, anywhere in the country, to take a stand on the VAT just as John McCain’s colleagues did in the United State Senate. As they do it will become apparent to all that the United States is not VAT country.

JD Foster is the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation. His primary focus is studying long-term changes in tax policy to ensure a strong economy. He also examines changes in Medicare, Medicaid and Social Security so they are both affordable and more effective.

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What terrifies me even more than than the concept of a Federal VAT is that the idiots who run New York State (ie the Dummercrats) will fall all over themselves to create a matching State VAT! The sad part is all they have to do is cast it as a “Soak the Rich” venue and most fools in this state will vote for anyone who supports it and then blame the GOP when they find out they are being charged as well.

I hope Senator McCain continues his fight now that he has seemingly found his consertive principles. I hope this is not a ruse in order to win reelection and then back to his conciliatory ways of the past.

Good one, Mr. McCain and the 84 senators. Thank you sincerely, for standing for the American family. The government should always be focused on priorities.

Priorities are services that apply to ALL AMERICANS, like safety and protection. Get rid of the VAT and NO “SPECIAL INTERESTS” ESPECIALLY WHEN THE EXPENSE takes from priorities. Special interests are not a necessity to survive, are unconstitutional, as they consist of racial bias, which promotes discrimination, should be the first to go before ANY TAX INCREASE! Before cuts and elimination of priorities. Ignorance and poor ideas and even poorer decisions are crippling, although curable.

Here’s a motto for Americans and this years election: show your human weakness, vote democrat.

i’m not even sure what the value added tax is.
All i know is my wife and I made a decent income in 2007 (approx $100,000) and still owe income tax from that year because i had debt from borrowed money to start my real estate business a few years before. The bottom line is we had to
pay about 28% of that to taxes and did not get to save much and up until now have spent most of it to live on because my real estate income dried up back in 08′. She’s a teacher and brings home approx $40,000 a year. Most of it goes to mortgage, insurance, food…, you get the picture.
To make a long story short i’m 52, she’s 47, w/ one child 12 & I see no signs of
encouraging prosperity in the near future.
Inheritance taxes,of which are expected in the near future, will most likely take half of what our parents work so hard in their life to save; and government can not wait to take that… ? what’s an american dream?

It is hilarious how Mc Cain has turned so conservative now he is running for reelection. If he gets elected again, he and Amnesty Graham will cut our throats again. Rampant imigration giveaway and jab us in the eye again with his antics across the isle, Please don’t give him credit for being a true conservative, he is a true progressive.

A VAT tax adds value only if we eliminate all other taxes. A consumption tax by itself is fair. A consumption tax on top of all the other taxes we already pay will further destroy our nation's economy by drastically reducing our spending power and slashing sales (i.e., income) for everyone.

Thank you Senate for taking a stand on VAT. This is proof that miracles can happen in the Senate and that all is not lost to the madness of the socialist's march. My take on this is like a scene out of Gary Cooper's High Noon except this time instead of being alone he has almost the entire town behind him. I sincerely hope that this is a sign to the left liberals that if they attempt to bring VAT to the Senate that this is what they will get. Thank you once again Senators!

The VAT has been likened to a sales tax, but it can be structured so it is absolutely invisible to the purchaser. Rather than making the cost of government more transparent to the citizens, it hides it. It is a politician's dream. Let's turn it into a nightmare for any pol who supports it!

Instead of merely saying "no" and eventually losing the tax fight simply based on budget deficits, why not use the VAT, FairTax, and other consumption tax ideas as an opportunity to swap bad taxes (Income, Social Security) for better ones (Consumption Taxes)?

Rather than assume the posture of fighting a battle we can't win (See "Deficits"), why not use this crisis to enact better policy?

1. Phase in something like a modified VAT/FairTax while phasing out the Income, tax, Soc. Sec Tax, or both.

2. Phase in a steep gas tax (this would cripple Iran, Saudi Arabia and Russia, simply the effect on oil prices) while phasing out Corporate income taxes and estate taxes

To help sell these items politically….

3. Argue that American Citizens deserve a "Spending Cap" to guarantee that we don't get into trouble again (The right's ignoring spending while fighting every tax has been their worst strategic mistake since winning the tax issue with Reagan)

4. To ameliorate the argument that "consumption taxes hurt the poor," we should include Charles Murray's idea of giving every American 21 and over a yearly $15,000 stipend. This stipend, which can easily be mandated to pay for one's health care/HSA and personal retirement account first, would succeed in "individualizing the welfare state," thus allowing Social Security, Medicaid, and Medicare to be replaced in a generation.

I know, once you process all that, you realize that it's quite elegant, and probably could become quite a popular set of reforms.

Sadly, such a platform will likely go nowhere in a movement (and a party) stuck on "NO!", where we concede the fight we should be having (spending) and re-fight the one glorious battle we won in 1983.

All while losing the war because we refuse to make the case for Federal and State constitutional spending caps.

Does anyone else think it the appropriate time to call this administration’s economic policies nothing less than socialist, as in “Marxist”. Even Heritage seems to banter around the subject!!
It is time to stop being polite, as in verbal content. The longer we remain polite the longer they have to put us all under their thumb.
Obama’s change was not understood during the election and the media is in denial!! Their next for a bailout arn’t they? And then what?

Bruno, I like your creative thinking about restructuring the tax codes. I think I could go along with your first proposal.

I can't agree with the second proposal about increasing gas taxes. Here, I think there are some better alternatives including the immediate start of offshore drilling off every possible American coastline and in Alaska, building more refineries and the implementation of a five year plan switching over from gasoline to natural gas as an automotive fuel, it's cheaper, cleaner and best of all, we have tons of the stuff right here in the U.S. Current automobiles can be modified relatively easy to run on naturlal gas and new ones can be designed to do so as well. Then watch the price of oil fall.

I can't say that I like the idea of giving people $15,000 a year to buy health insurance. It won't do anything to slow down price increases and may have the opposite effect.

I would support your idea of a government spending cap, but I simply don't trust the government to keep its word on something like this. Remember, the Social Security trust fund was supposed to be kept in a "lock box" and the money was to be spent only on the benefits provided. Unfortunately, the government had the key to the "lock box" and helped themselves to the proceeds whenever they felt the need and never with the knowledge or the permission of the citizens.

Thank you, Mr. Foster, for running up the warning flag about the VAT. I have been shocked to see such quality news programs as the Fox News All Stars talk about the VAT as though it is inevitable and possibly necessary. When conservatives are willing to weigh down the economy with an added hidden tax rather than tackle the hard but necessary chore of reducing government spending, we are in real trouble. Even the media good guys don't seem to know that the European VAT was a replacement tax for corporate income taxes and that it VAT tax rate has been rising ever since. Does anyone in the popular media do research anymore?

The author is correct. This “is not VAT country”. But that will have absolutely no effect on Obama’s ideology. Just as with every policy Obama has pushed since
he took office, he does not, and will not care what the American people think.
Obama is leading his pack of socialist over our wishes and demands. HE JUST DON’T CARE! He is determined to “transform” this nation into his European style of socialism, and is assisted by his lackeys in Congress and the left-wing news media. It is up to us. We must stop him and it must be now.

McCain was right to take the initiative on this instead of waiting for it to be rolled out by the administration.

I too believe that the administration will unveil the VAT as “no big deal, all of the European countries do it”. And, of course, we want to be just like them in all things, don’t we?

Gee, with all those savings that are going to be generated by health care reform, and the corresponding deficit reduction, I can’t understand why we are going to need a VAT, or a tax on “cadillac” health insurance plans, or why health insurance companies and pharmaceutical companies need to be taxed additionally. With all the new jobs created by the Stimulus it would seem that more taxes would be coming in to the government, so that new taxes of any sort would not be necessary.

The problem with phase in one tax while phasing out another is that taxes never get phased out. Dems and Republicans can not seem to get rid of any tax. They all talk spend less but I havent seen much of it actually happen.

No VAT, no FAIRtax, no sales tax or anything you want to call it. Not only is this a regressive tax, but it would ultimately be altered in its details to be "fair". Politicians would carve out exemptions for their pet group or category of spending, and we would end up with a hodge-podge like the current income tax.

I completely agree with a flat tax on income. It would be easy to tailor a big enough standard deduction to get it off the backs of the truly poor, and make the rest pay the same percentage. It should treat investment income just the same as wages. It would be politically impossible not to have a similar flat tax on businesses, even though such taxes would be paid by the end consumer in the chain. At least it would ensure that everybody sitting at the table would have their ante in the pot.

While Bruno has an exceptionally viable concept and strategy (with amendments) to follow I think Sen. McCain did get this one off to the right start by being proactive for a change. He also apparently didn’t have to “sell” this idea to anyone since it met a fully bipartisan vote of 84 to 13 with only 2 not voting.

We needed a strong way to stop the next serious (post November elections) madness that was being readied to foist upon us. Now we need a similar one in the House. That will make it more difficult to go the other way once that special committee (with Andy Stern) releases their foregone conclusions that we need a VAT to maintain this level of spending.

There are several tax and incentive concepts that could be applied to extract the American citizens out of this mess without overburdening everyone’s wallet. Simply not funding the Progressives/Statists/Socialists programs would stall the spending aspect. Repealing specific unnecessary programs including the HCR act, and if need be, dismantling federal departments that haven’t met their mission since inception (DOE) and others. Repealing the income tax from 1913 and replacing it with the FAIR TAX, no increase tax on gas or diesel fuel but review the inclusion of a specifically targeted and minor percentage VAT of 5% with half of that going to repay Social Security and the remaining half going to pay down the principle of the debt with the caveat that as the one becomes fully paid off that portion of the VAT now gets applied to the remaining program in need of reimbursement and once completed the VAT ends on December 31st of that year without exception. There is a need to incorporate a severe punitive action for any Legislator of member of the Executive branch who even attempts to modify any of the terms is this law once enacted.

To stimulate the economy without increasing government spending I would enact something designed to actually help every citizen relative to health insurance (therefore health care) and improve their personal financial status. First off I would change how businesses (small, medium and large) account for their employees health insurance premiums. Return to the practice used for a year or two during WWII (but make it permanent) that businesses will write off all health insurance premiums as a cost of doing business! Now, those who before had to contribute pre-tax dollars for their health insurance now have more usable money in their paycheck. Next is to allow those working citizens (NO non-citizens & NO ILLEGAL Aliens) to obtain a waiver to not pay tax on their individual health insurance policies provided their employer does not provide that type of health insurance.
A fortified health savings account plan in which tax exempt money would be placed in a separate interest bearing account for individuals and families to draw from to better deal with routine or even unexpected health care costs that if not used could be rolled forward indefinitely and could be willed to other family members for portions not used. Make the annual max amount per family member in the range of $5K to $10K and tied to social security numbers. If, by chance the money is not fully consumed by the time they reach the age of retirement or nursing home admittance then they can use the money to improve their quality of life however they choose.
In order to reduce future financial liabilities by the government for both Medicare and for Medicaid, why don’t we incentivize taking personal responsibility for our individual healthcare (to include long term care insurance [LTC]) during the preponderance of our lifetime? We already know that the greatest costs associated with these programs routinely occur in the last few years of the person’s life. Let’s start a program where citizens who purchase and maintain Medicare Supplement Insurance plans above the federally mandated Plan C and who purchase and maintain a LTC insurance policy that would cover the current cost plus and an additional $100 per day benefit of the most expensive type of skilled nursing home care which is a dementia or Alzheimer’s unit, with the following mandated features: inflation rider, return of premium rider, lifetime benefit and a 90 day elimination period. Four additional important facets include that the individual pays no tax on the premium dollars to cover these insurance policies, that benefits paid above and beyond the cost of the nursing facility will not be taxed (by the federal and the state government period) and the government will pay the first 90 days of their nursing home (assisted living and/or skilled nursing) stay and the patient does not have to change “beds” from a Medicare or Medicaid bed to a self paying bed. Paying for the first 90 days of which ever happens (assisted or skilled) is dramatically cheaper than paying for the entire stay much less the last six months to a year. The government’s financial liability is reduced and patient gets to choose and control his or her destiny. Also, since most insurance policies include Hospice care, that cost too is removed from the government’s liability. Also, I would repeal the social security and Medicare/Medicaid law enacted during the Carter administration that had the government take on the financial responsibility for giving those aforementioned benefits to illegal aliens! That will go a long way to making those programs solvent longer. Next is to make the uncovered illegal alien pay before any medical services are rendered like they do in Germany today. No free care for illegal aliens.

Well, I think I’ve covered enough of a rough draft of a working concept to actually solve some of our country’s most critical issues without stripping the citizens of any of their personal liberties while retaining their dignity throughout their lives.

Rule #1: Don't believe any politician that was once (or still is) liberal, democrat, progressive, moderate. A tiger never changes its stripes.

Rule #2: Don't put stock in any candidate running for any public office that has been part of a secret society. Nothing good has come from secret societies (I went to a university with a number of them)

Rule #3: Nearly any career politician is NOT to be trusted with what they say or anymore time in office. TERM LIMITS. And roll back the benefits that make it attractive to be a career politician. Compensation, yes; cushy, life-term job & benefits, NO!

Rule #4: If they are "glorified" by the main stream media as "good, promising, a rising star, etc", REJECT THEM! The main stream media is an institution controlled by the few to control the masses along their agenda.

[…] is: NOBODY has officially proposed it yet except John McCain, the Maverick. He alone proposed an anti-VAT amendment preemptively. Like anybody else I would like to be able to keep as much of my hard-earned money as […]

[…] nation into a full state of dependency on Washington will be complete. The stakes are that high.As JD Foster pointed out last week, passing a VAT has been part of President Obama’s long-term strategy all along. First he had to […]

[…] VAT’s unpopularity shows he is a MOTO – a master of the obvious. Even this early in the debate, 85 United States Senators stood up on April 15 to oppose a VAT.On the other hand, Volcker’s recognition of the VAT’s […]

[…] VAT’s unpopularity shows he is a MOTO – a master of the obvious. Even this early in the debate, 85 United States Senators stood up on April 15 to oppose a VAT.On the other hand, Volcker’s recognition of the VAT’s […]

"Vattening" Up the government by the imposition of a VAT will clearly be bad for American families, American businesses, and in particular for the U.S. economy. One need look no further than our European allies, to see what a VAT does to job creation, economic dynamism, motivation and innovation. Either Obama has completely lost his faculties when it comes to the realm of economics, or he is gunning for the demise of our economy. Either way, this is a very bad trait in the President of the United States.

The tax monster arriving in January looks rather ominous and anyone who thinks the economy is on the mend, had better take a deeper look into Obama's policies to see where they will land our country. Don't be disappointed … it won't be anywhere near Prosperity, USA.

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